Search
Search for an ETF or holding
Search for an ETF or holding
Updated 2mo ago.
Updated 2mo ago.
A mortgage is a loan secured by real property, used to finance the purchase of a home. In Canada, mortgages have a term (rate period, typically 1 to 5 years) and an amortization period (total repayment duration, typically 25 years). If the down payment is less than 20%, mortgage loan insurance (CMHC) is mandatory.
You buy a $400,000 condo in Toronto with a 10% down payment ($40,000). Since the down payment is under 20%, you must pay CMHC insurance (about 4% of the loan = $14,400, added to the balance). Your total mortgage is $374,400. You choose a 5-year fixed term at 4.5% with a 25-year amortization. At the end of the 5-year term, you will need to renew at the market rate. Mortgage brokers like nesto or HSBC often offer lower rates than the big banks.
A mortgage is the largest debt most Canadians carry. The difference between a 4% and 5% rate on a $400,000 loan is about $230 per month — that is $2,760 per year that could go into your investments. Always negotiate your rate and compare multiple lenders. The HBP (RRSP) and FHSA can help accumulate a down payment. Prioritize mortgage repayment or investing based on comparing your mortgage rate to the expected return on your investments.